Traditionally, service and product providers, including banks and other financial institutions, have attempted to retain all customers at whatever the costs. Without regard to the customer's characteristics and profitability to the provider, service and product providers have made efforts to retain even the most delinquent customers. In most instances, the same offer is presented to all customers. This type of retention effort often results in lower profitability to the provider.
Currently, there are many different types of banking related products and services offered to customers. Different individuals are attracted to different products and have varying needs and expectations. For example, a single college student may acquire a credit card for emergency purposes and regular school expenses. The student's parents may even pay the bill for the student. On the other hand, a parent of four children may have several credit cards, a mortgage, loans, retirement funds, and several college funds. Without knowledge of the customer's spending habits and demographics, it becomes more difficult to present incentives that effectively retain customers.
Due to changing circumstances, customer need, and fierce competition among other providers, there may be a high rate of termination in response to more attractive incentives offered by competitors. If a current provider is not adequately meeting the needs of its customers, the customer may build associations elsewhere when confronted with an attractive incentive or offer. In other instances, a customer may initiate termination due to dissatisfied service and lack of customer satisfaction. Generally, it is beneficial for the provider to retain current customers for the purpose of building recognition and loyalty. Also, long-term customer loyalty establishes a strong presence in the industry as well as a prominent reputation. However, in other instances, when a customer becomes unacceptably delinquent in payments or otherwise unprofitable, it may be economically detrimental for the provider to maintain relations with this customer. Thus, efforts to retain customers are partially motivated by the customer's behavior and attributes.
When a provider is confronted with a request to terminate, the provider may present numerous types of offers or promotions in an effort to retain that customer. However, without becoming familiar with a customer's buying habits or attributes, presentment of offers may not be well received by the customer. An incentive presented by the provider may be attractive to one group of customers while another group of customers may have little or no interest in the presented incentive. Also, different types of products may yield different needs and expectations from customers. Further, based on the type of call and the customer's objectives, a customer may be more or less willing to continue association with a particular provider.
Therefore, the chances of retaining a customer in response to a request to terminate are significantly lower when customer related factors are not readily available or properly segmented. Other problems and drawbacks exist with current systems.